Do Parents Invest Less in Worse-Performing Children? Evidence from the Asian Financial Crisis

Magda Tsaneva

Bulletin of Indonesian Economic Studies, 2017, vol. 53, issue 1, 83-93

Abstract: This article uses data from Indonesia around the time of the 1997–98 Asian financial crisis to examine the role of parental preferences in human capital accumulation. Using a household fixed-effects estimation, I test whether parental education spending is affected by child mathematics test scores. I find that parents are more sensitive to the human capital of younger children, who are penalised for having lower skills than their older siblings. Differences in investment by child gender or birth order are evident in 2000 but not in 1997. This suggests that parents may have an efficiency investment strategy only when resource-constrained, and that education of younger children may be a luxury good.

Date: 2017
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DOI: 10.1080/00074918.2016.1224320

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Bulletin of Indonesian Economic Studies is currently edited by Firman Witoelar Kartaadipoetra, Arianto Patunru, Robert Sparrow, Sarah Xue Dong and Sean Muir

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